Evidence of meeting #82 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tfsa.
A recording is available from Parliament.
Conservative
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
It's regarding corporate social responsibility. While you've been a free enterprise with a social conscience, do you find that within the government or within the private sector there's more of a movement in that direction as well?
President and Chief Executive Officer, Imagine Canada
We're seeing more and more companies understand that their consumers are demanding that they be good corporate citizens.
Conservative
The Chair Conservative James Rajotte
Thank you very much. We'll have to leave it at that.
Mr. Côté, the floor is now yours.
NDP
Raymond Côté NDP Beauport—Limoilou, QC
Thank you, Mr. Chair.
My thanks to all the witnesses for being here with us today.
Ms. Donnelly and Mr. Young, in your very interesting article on the issue, you pointed out something that I already knew but that I'm certain will benefit everyone. Over 30 years ago, in 1982, Canadians' personal savings were at about 20%. Since 2000, this rate has systematically gone under 5%.
Clearly, one of the arguments for the TFSA is to encourage people to save. However, just like Mr. Fréchette, you showed that, unfortunately, it is mostly a shift in savings. Clearly, the tax-free approach solves nothing at all. The problem seems to be elsewhere. Can you give us some idea of what we should do to promote savings?
Associate Professor, Taxation, Goodman School of Business, Brock University, As an Individual
There was an OECD study on tax-assisted savings done in 2003-04. What that showed is that if you want to encourage savings by the lower income earners and middle-income earners you should have subsidies or grants similar to the RESP. If that's the target group that you're trying to bring in to save, as opposed to the higher-income earners, then you should look at grants like the RESP.
NDP
Raymond Côté NDP Beauport—Limoilou, QC
In my view, the TFSA is a subsidy for a shift in savings. I'm not sure how you feel about my opinion on the matter. Am I correct?
Associate Professor, Taxation, Goodman School of Business, Brock University, As an Individual
I would agree with that.
In the information we looked at from the British experience, that was one of the conclusions of the ISA study. What happened in the U.K., as I said, was the ISAs were introduced in 1999, and they had a sunset clause that they were going to be under review in the year 2007. They did an extensive study on the ISA holders at that time and exactly what types of new savings they were trying to generate, because when the ISAs were introduced by the then Labour government of Tony Blair, they said the goal of the ISA was in fact to encourage low-income and middle-income earners to save and participate.
The study that was concluded in 2007 indicated that there was a take-up rate by that cohort; however, the largest take-up rate was in the upper income levels. There was definitely a reshuffling of assets or money out of taxed accounts.
Raymond Côté NDP Beauport—Limoilou, QC
Thank you very much.
Mr. Bonnett, in the brief that you submitted for the prebudget consultations, we see a very important and interesting recommendation. The federation recommends deeming siblings to be non-arm's length, specifically for farm corporations.
My colleague Francine Raynault introduced Bill C-661 to address this recommendation and help brothers and sisters be properly recognized. Unfortunately, the Conservative government is against this measure.
Could you comment on the government's position in that sense?
President, Canadian Federation of Agriculture
Yes. First of all I would like to say that Bill C-661 does attempt to address that issue. We have actually consulted with some accounting firms, and I think the proposal looks like a simple way to fix the issue.
Maybe I should explain a little further. Quite often farmers will develop a succession plan. When you're passing an operation on to siblings, you get the capital gains exemption on the transfer. However, if they split that operation soon after the transfer, that money has to be paid back.
I don't think it recognizes that now we have some very, very large farms that are transferring, and there may be siblings, and even with the best laid plans you may need to change the operation, and there shouldn't be a disincentive. I think what we're trying to suggest is that there's a flaw in the system in that it treats siblings differently than it would treat other people. I think the idea is to clean up the language within the tax policy. I think we were talking earlier with some of the professors about tax policy becoming very detailed. I think one of the things that we noticed in Bill C-661 is it tried to simplify dealing with the issue, so we would support that legislation going ahead.
Conservative
The Chair Conservative James Rajotte
Okay.
Thank you, Mr. Côté.
We'll go to Mr. Van Kesteren, please.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Thank you all for being here.
I'm tempted to go to our two academics.
I'm puzzled; I really am. I'm a businessman and maybe I've just done everything wrong my whole life. Maybe I should have gone to business school. I would suspect that there are other schools that would disagree with different academics. As a matter of fact, I'm quite sure of that.
I can tell you from my own experience.... It's no secret; I think everybody around here is in that bracket that is somewhat privileged. I don't use the tax-free savings account. I suspect part of the reason is that I have a decent pension now. I make enough money that I can save; I can invest in other places. My wife, on the other hand, who has been a stay-at-home mom her whole life—now, mind you, we're still together, so she'll have that benefit of my experience in life—but she uses that, and her income is substantially less.
I don't know if I want you to comment. I know it's not fair, possibly, but I just think this has to be said. I think you really need to get out of the British model and really study the Canadian model, because there are so many dissimilarities, starting with a tax system where they just tax the living daylights out of people and there is no money left to save.
I would direct this to Ms. MacEwen, too, that if I were a worker who was making $40,000 or $60,000 a year, and if all I was getting was CPP, you know, that's a whole different discussion. We can have that discussion. There are probably reasons for why that happens, and part of it is because we have inequity in our pension system in this country. Then I would be really enticed to start saving. I suspect that when you do your study, you will find that in actuality that is what is going to happen.
The last thing I'd like to say is that—and this is why I find this discussion so bizarre—the money is mine. If it's $40,000, $60,000, or $150,000, once I've paid the taxes, it's mine. If I want to stick it in a tin can and bury it in the backyard, that's my business. I just, for the life of me.... But to put it into a bank or put it into a savings account where it can be reinvested by people, that's where I'm going next.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Mr. Podruzny, wouldn't you agree that it makes good sense for a business to save money and to build equity, and then to reinvest it? Isn't that in essence what we're encouraging the general population to do?
Vice-President, Business and Economics, Chemisty Industry Association of Canada, Canadian Manufacturing Council
From a business perspective, if you don't have a profit, you don't have anything to reinvest. So absolutely, it's all about cash flow.
Just as a personal observation, I too have a youngster in his early twenties, and he and his wife have already started saving. They pay themselves first. They don't have big incomes, and they're not getting a big supplement from their dad.
I think it's encouraging a behaviour.
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Does it make you somewhat nervous when people talk about taxing our businesses more and more that we've lost some vision that if businesses aren't profitable, the consequences are much more dire than the suggestion that we can tax our way into prosperity?
Vice-President, Business and Economics, Chemisty Industry Association of Canada, Canadian Manufacturing Council
The point we made in our presentation is that we're in competition globally, and industry is, like it or not, quite footloose in that regard. We're competing, whether it's with Singapore or Texas, for investment and growth and jobs, so we must have a competitive environment if we're going to attract those investments. They're going somewhere in the world. We want to bring them into Canada.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Van Kesteren.
Mr. Adler, please, for your round.
Conservative
Mark Adler Conservative York Centre, ON
Thank you all for being here.
I want to begin my questioning, first of all, with Mr. MacDonald.
As you know, the existing capital gains tax exemption for the donation of publicly listed securities is going to be extended to include donations resulting from the sale of private shares and real estate, which will.... On your website, it claims an extra $265 million over the next four years.
Could you comment on that and on how positive it would be for your sector?
President and Chief Executive Officer, Imagine Canada
Absolutely, creating an environment that inspires Canadians to contribute to charitable organizations is such a healthy thing for us in a society where we're seeing fewer and fewer Canadians actually doing that. We're hoping this is a measure that will provide incentive for Canadians to give more to charities and non-profit organizations.
Conservative
Conservative
Mark Adler Conservative York Centre, ON
Thank you.
Mr. Podruzny, Canadian Manufacturers & Exporters calls budget 2015 a “big win” for Canadian manufacturing. You indicated to my colleague Mr. Van Kesteren just a few minutes ago that we're in a competition globally to attract investment, attract jobs.
I'm curious. Some people in some quarters are in favour of raising corporate taxes. What, in your opinion, would that do to our ability to compete globally, if corporate taxes were to go up?
Vice-President, Business and Economics, Chemisty Industry Association of Canada, Canadian Manufacturing Council
In the case of manufacturing, it's a very visible number to compare in different jurisdictions. It may not be the major tipping factor in where you invest. For example, if you have to have the raw material, Canada has some resources that attract certain kinds of investments, and that might trump the tax rate, but for the most part, companies are going to go where they can maximize their profits. If the corporate tax rate is materially higher.... And we have to be careful about looking at posted tax rates. The U.S. federally has a 35% tax rate, but our counterpart association likes to mention that the taxes paid because of deductions and whatnot, in our sector at least, average about 16.6%.
Having the money within the corporation gives you the option of reinvesting and adding new capacity. That's what we see happening globally. As the money is available, there are investments taking place somewhere. We're going after some of that, and we're being compared very easily. They can look at certain measurables, whether it's corporate tax or electricity rates or whatever.